How to Form a Compliant SDVOSB Joint Venture

A joint venture (JV) lets a certified SDVOSB partner with another firm — often a larger mentor — to compete for set-asides that are beyond either party alone. But SBA's rules are exacting: the JV agreement must contain specific provisions, the SDVOSB must control the JV, and the work and profit must be split correctly. A defective JV agreement is one of the most common reasons SDVOSBs lose status protests. This guide covers the requirements.

Before You Start

What you'll need

• A certified SDVOSB as the managing venturer
• A willing JV partner (and an approved SBA mentor-protégé agreement, for an MPP JV)
• Counsel familiar with 13 CFR Part 128 JV requirements

Systems used: Written JV agreement · SBA mentor-protégé agreement (if applicable) · SAM.gov

1. 1

   Decide whether you need a JV — and what kind

   Use a JV when a single opportunity exceeds your capacity or past performance. Two SDVOSBs can JV together, or an SDVOSB can JV with a non-SDVOSB (including a large business) under an SBA-approved mentor-protégé agreement, which provides an exception to affiliation.

2. 2

   Make the SDVOSB the managing venturer

   The certified SDVOSB must own at least 51% of the JV and be designated the managing venturer. An employee of the SDVOSB managing venturer must serve as the project manager responsible for performance.

   Tip: Control by the SDVOSB is non-negotiable — a JV where the larger partner effectively runs the work invites an ostensible-subcontractor or control-based status protest.

3. 3

   Put the required provisions in a written JV agreement

   13 CFR 128.402 requires the written JV agreement to address specific items: purpose of the JV, the 51% SDVOSB ownership, the designated managing venturer and project manager, profit distribution commensurate with work performed, bank account control, and recordkeeping. Omitting a required provision can render the JV ineligible.

4. 4

   Allocate profits to match the work share

   Profits must be distributed commensurate with the work each venturer performs — the SDVOSB cannot simply take 51% of profit while doing a small share of the work. Tie the profit split to the workshare reflected in the agreement.

5. 5

   Meet the performance-of-work rules

   The JV as a whole must meet the limitations on subcontracting, and the SDVOSB managing venturer must perform at least 40% of the work done by the JV (the venturers' combined work, not counting non-similarly-situated subcontractors). Plan the workshare so the SDVOSB clears this floor.

6. 6

   Register and keep the JV current

   Register the JV in SAM.gov and submit the JV agreement when required by the solicitation. Maintain separate records and update the agreement for each contract the JV pursues, since SBA reviews JV compliance at the time of the offer and can review again on protest.

Primary Sources

• 13 CFR 128.402 (JV requirements)
• 13 CFR 125.8–125.9 (JV & mentor-protégé)
• 13 CFR 125.6 (performance of work)

This guide is general information, not legal advice. Verify current requirements against the cited regulations and your contracting officer before acting.

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Terms Used in This Guide

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